Rebuilding Platform Antitrust: Moving on From Ohio V. American Express

• Author: Steven C. Salop, Daniel Francis, Lauren Sillman, and Michaela Spero
• Position: Professor of Economics & Law, Georgetown University Law Center/Assistant Professor of Law, NYU School of Law/Staff Attorney, Federal Trade Commission (written in her personal capacity and not as a representative of the FTC; the views expressed are her own and not necessarily those of the Commission or any individual Commissioner)/Legal Counsel ...
• Pages: 883-931

REBUILDING PLATFORM ANTITRUST: MOVING ON

FROM OHIO V. AMERICAN EXPRESS

S

TEVEN

C. S

ALOP

D

ANIEL

F

RANCIS

L

AUREN

S

ILLMAN

M

ICHAELA

S

PERO

*

On June 25, 2018, the U.S. Supreme Court issued what may be the worst

antitrust decision in many decades: Ohio v. American Express Co. (Amex).

1

In

an opinion authored by Justice Thomas for a bare majority—and over a biting

dissent—the Court dismissed an antitrust challenge to American Express’s

“antisteering” rules, despite ample evidence of harm furnished by a lengthy

trial, as well as the teachings of economic theory. In doing so, the Court up-

ended a series of legal fundamentals, inverted accepted practices in the inter-

pretation of evidence, and plunged platform antitrust into confusion.

2

The Court’s tortured analysis has left courts, agencies, and businesses with

a host of puzzles, triggered a blizzard of scholarship and commentary—

mostly very critical

3

—and invited a flurry of ill-conceived litigation argu-

*Steven C. Salop, Professor of Economics & Law, Georgetown University Law Center;

Daniel Francis, Assistant Professor of Law, NYU School of Law; Lauren Sillman, Staff Attor-

ney, Federal Trade Commission (written in her personal capacity and not as a representative of

the FTC; the views expressed are her own and not necessarily those of the Commission or any

individual Commissioner); Michaela Spero, Legal Counsel Regulatory Affairs, Amadeus. For

immensely helpful and generous comments, we are grateful to Erik Hovenkamp, Herbert

Hovenkamp, Al Klevorick, Douglas Melamed, John Newman, Sharis Pozen, J. Robert Robert-

son, and Irving Scher, as well as two anonymous peer reviewers.

1

138 S. Ct. 2274 (2018). Candidates for the previous record-holder could include, in no

particular order, Appalachian Coals, Inc. v. United States, 288 U.S. 344 (1933); United States v.

U.S. Steel Corp., 251 U.S. 417 (1920); United States v. Arnold, Schwinn & Co., 388 U.S. 365

(1967); and United States v. Von’s Grocery Co., 384 U.S. 270 (1966).

2

Note that the Court used the terms “two-sided market” and “platform” interchangeably. To

avoid confusion with the antitrust concept of a relevant product market, in this article we use the

term “platform” to refer to multisided business models and the term “market” when discussing

antitrust market definition. See generally infra Part II.A.2.

3

See, e.g., Michael Katz & Jonathan Sallet, Multisided Platforms and Antitrust Enforcement,

127 Y

ALE

L.J. 2142, 2145 (2018); Dennis W. Carlton, The Anticompetitive Effects of Vertical

Most-Favored-Nation Restraints and the Error of Amex, 2019 C

OLUM

. B

US

. L. R

EV

. 93 (2019);

883

884

A

NTITRUST

L

AW

J

OURNAL

[Vol. 84

ments.

4

The practical inheritance of Amex is plain to see: the burdens faced by

plaintiffs have been needlessly increased, and enforcement efforts have been

obstructed.

5

At least one high-profile merger challenge has already failed as a

direct result of Amex’s legacy of confusion,

6

and the decision will continue to

haunt and obscure the antitrust analysis of “Big Tech” platform practices for

years to come.

Much has been written about Amex. Commentators have criticized the opin-

ion in a variety of respects, including its treatment of market definition and its

handling of effects evidence.

7

Some commentators have also criticized the

Court’s introduction of a formal market-definition requirement for vertical

cases, and its refusal to accept direct evidence of anticompetitive effects as

proof of market power.

8

Others have critically analyzed the Court’s use of

economic theory and evidence, including with respect to the impact of the

antisteering rules on competition,

9

as well as the Court’s reliance on the fact

of market growth as evidence that the restraints were procompetitive.

10

And,

while the balance of scholarly commentary has been negative, some have de-

fended the Court’s decision and reasoning,

11

while others have favored the

decision but not the reasoning.

12

This article looks to the future. Our aim is to provide a general framework

for courts and agencies to use in confronting practices and transactions in

future platform cases. We draw on litigation evidence and economic theory to

explain why the approach and reasoning of the Amex decision was objectiona-

Herbert Hovenkamp, Platforms and the Rule of Reason: The American Express Case, 2019

C

OLUM

. B

US

. L. R

EV

. 35 (2019); Erik Hovenkamp, Platform Antitrust, 44 J. C

ORP

. L. 713

(2019); Michael L. Katz & A. Douglas Melamed, Competition Law as Common Law: American

Express and the Evolution of Antitrust, 168 U. P

A

. L. R

EV

. 2061 (2020); Natasha Sarin, What’s

in Your Wallet (and What Should the Law Do About It?), 87 U. C

HI

. L. R

EV

. 553 (2020). See

also,e.g., Joshua D. Wright & John M. Yun, Ohio v. American Express: Implications for Non-

Transaction Multisided Platforms, CPI A

NTITRUST

C

HRON

. (June 2019) (endorsing Amex).

4

See, e.g., United States v. Sabre Corp., 452 F. Supp. 3d 97 (D. Del. 2020); Defendant’s

Supplementary Brief on United States v. Am. Express, United States v. Charlotte-Mecklenburg

Hosp. Auth., No. 3:16-cv-00311-RJC-DCK (W.D.N.C. Oct. 12, 2016).

5

See US Airways, Inc. v. Sabre Holdings Corp, 938 F.3d 43 (2d Cir. 2019).

6

The reasoning of the district court in Sabre Corp., 452 F. Supp. 3d at 135–40, was strongly

influenced by the Amex decision, as discussed infra text accompanying note 144.

7

See, e.g., E. Hovenkamp, supra note 3; Katz & Melamed, supra note 3; John B. Kirkwood,

Antitrust and Two-Sided Platforms: The Failure of American Express, 41 C

ARDOZO

L. R

EV

.

1805 (2020).

8

See, e.g., H. Hovenkamp, supra note 3.

9

See, e.g., Dennis W. Carlton & Ralph A. Winter, Vertical MFN’s and the Credit Card No-

Surcharge Rule, 61 J.L. & E

CON

. 215 (2018).

10

See, e.g., John M. Newman, The Output-Welfare Fallacy: A Modern Antitrust Paradox, 107

I

OWA

L. R

EV

. 563 (2022).

11

See e.g., Wright & Yun, supra note 3.

12

See, e.g., Aaron M. Panner, Market Definitions and Anticompetitive Effects in Ohio v.

American Express, 130 Y

ALE

L.J. F. 608 (2021).

2022]

R

EBUILDING

P

LATFORM

A

NTITRUST

885

ble and to offer a better method for future platform antitrust matters. In partic-

ular, we build on the idea that appears to have motivated the Court in Amex—

that certain platform cases may compel a special approach grounded in the

distinctive economics of multisided businesses—and we develop an alterna-

tive for courts and agencies to the flawed and incomplete analysis that perme-

ates the opinion. We propose a set of principles to guide balancing in platform

cases to replace the Court’s misguided approach, and we demonstrate the util-

ity of those principles by applying them to the Amex trial record, including

some underappreciated aspects of that record. We also offer some practical

suggestions for courts and legislators to help put Amex behind us and right the

ship of platform antitrust.

We proceed in four Parts. Part I sets out the evidentiary record (including

critical facts ignored or marginalized by the Court), as well as the holdings of

the Amex courts upon that record. Part II sets out the Amex’s Court’s analyti-

cal errors—both legal and economic—and outlines a better approach to plat-

form antitrust cases: one that accurately reflects economic realities in platform

cases while preserving antitrust’s legal fundamentals. Part III demonstrates

the utility of our proposed approach by applying it to Amex itself. Finally, Part

IV briefly outlines three routes back to a sensible platform antitrust frame-

work: a clean course-correction by the Supreme Court; limiting decisions by

lower courts that would take seriously the many limiting conditions that were

expressed and implied in the Amex majority opinion; and a surgical fix by

Congress.

I.AN ANTITRUST TALE OF WOE

A. T

HE

O

RIGIN OF

A

NTISTEERING

Credit card networks, which emerged in their modern form in the mid-20th

century,

13

are platforms. Visa and Mastercard operate as networks connecting

financial institutions that offer Visa- or Mastercard-branded credit cards to

cardholders (through “issuing banks”) with financial institutions that offer

payment acceptance services to merchants (known as “acquiring banks”).

14

In

contrast, American Express interacts directly with both cardholders and

merchants.

15

When a cardholder uses a credit card, the merchant pays a fee. For Visa and

Mastercard payments, this merchant fee is allocated among three parties: the

cardholder’s issuing bank, the merchant’s acquiring bank, and the credit card

13

United States v. Am. Express Co., 88 F. Supp. 3d 143, 160 (E.D.N.Y. 2015).

14

Id. at 156–57.

15

Id. at 157.